Why do people trade iron condors

[tradelosses]

It seems like people are forced to enter these awful trades due to the margin requirements being too high. Margin requirements are designed to protect the brokers and not the customers. So that means customers have to enter bad trade likes iron condors that generate huge commissions for brokers

99% of the time, an iron condor, if it fails, will expire above one of the legs ,meaning you lose the maximum amount and be worse-off than if you sold a strangle or straddle. Only a tiny fraction of the time will having one of the legs actually save you money vs. a strangle or straddle.

I'm talking about index futures, commodities, and very liquid stocks, not smaller stuff


The commissions are the real P&L killer though

 

[MattZ]

Margin requirements are designed to protect the brokers and not the customers.

Margins are determined by the exchanges. Brokers enforce it. We don't make our own rules.
Day trading are determined by the FCMs.

 

[Deuteronomy_24_7]

Margins are determined by the exchanges. Brokers enforce it. We don't make our own rules.

Margin minima are determined by the exchanges but FCMs can charge more, and often do.

 

[OptionGuru]

• Do you know what an IC is?
• Based on your question I don't think you do.

 

[MattZ]

Margin minima are determined by the exchanges but FCMs can charge more, and often do.

I would not say this is a rule. There are customers with consistent margins calls and this is where the risk department may raise margins. Other instances is where the customers may run large risk not always visible by margins, like in Options selling. However, I do find most FCM do enforce exchange margins in overwhelming majority of the time. At least the FCMs we work with.

 

[Martinghoul]

It seems like people are forced to enter these awful trades due to the margin requirements being too high. Margin requirements are designed to protect the brokers and not the customers. So that means customers have to enter bad trade likes iron condors that generate huge commissions for brokers

99% of the time, an iron condor, if it fails, will expire above one of the legs ,meaning you lose the maximum amount and be worse-off than if you sold a strangle or straddle. Only a tiny fraction of the time will having one of the legs actually save you money vs. a strangle or straddle.

I'm talking about index futures, commodities, and very liquid stocks, not smaller stuff


The commissions are the real P&L killer though

'Cause people, as a rule, like collecting pennies. Using iron condors makes people feel that they're collecting pennies in front of a mountain bike, rather than a bulldozer.

 

[El OchoCinco]

It seems like people are forced to enter these awful trades due to the margin requirements being too high. Margin requirements are designed to protect the brokers and not the customers. So that means customers have to enter bad trade likes iron condors that generate huge commissions for brokers

99% of the time, an iron condor, if it fails, will expire above one of the legs ,meaning you lose the maximum amount and be worse-off than if you sold a strangle or straddle. Only a tiny fraction of the time will having one of the legs actually save you money vs. a strangle or straddle.

I'm talking about index futures, commodities, and very liquid stocks, not smaller stuff


The commissions are the real P&L killer though

I do not think your descriptions of Iron Condors are accurate.

Anyone who loses full amount on IC because they let the leg expire with the market above or below one of the legs is an idiot trader.

Commissions depend on volume. ToS for example and IB offer discounted commissions for large volumes.

People are nto forced into ICs because of margin requirements being high.

I think you do not know what an Iron Condor is and are thinking of something else altogether.

Please explain how the maximum loss on an IC is worse than maximum potential loss or unlimited loss on a short strangle/straddle?!?!

 

[Amalgam]

'Cause people, as a rule, like collecting pennies. Using iron condors makes people feel that they're collecting pennies in front of a mountain bike, rather than a bulldozer.

If they're heads up that's good luck!

 

[ET180]

'Cause people, as a rule, like collecting pennies. Using iron condors makes people feel that they're collecting pennies in front of a mountain bike, rather than a bulldozer.

I know...that's why I do the reverse. I only invest in lottery tickets. Screw the mountain bike. I'm risking a few pennies to get the mountain.

 

[Dolemite]

It seems like people are forced to enter these awful trades due to the margin requirements being too high. Margin requirements are designed to protect the brokers and not the customers. So that means customers have to enter bad trade likes iron condors that generate huge commissions for brokers

99% of the time, an iron condor, if it fails, will expire above one of the legs ,meaning you lose the maximum amount and be worse-off than if you sold a strangle or straddle. Only a tiny fraction of the time will having one of the legs actually save you money vs. a strangle or straddle.

I'm talking about index futures, commodities, and very liquid stocks, not smaller stuff


The commissions are the real P&L killer though

If commissions kill any trade in this day and age you need a new broker. Your margin requirements as well as your 99% of the time statement show you don't really understand the iron condor or how to trade it. That being said it is just one tool in a toolbox and selling iron condors in this volatility is probably not the best tactic.